-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VFWpHxXbabOyzynghmhoVIO7UB4KWTfN7ZvK13FlaKBTox745y6ccjbOn6QhhBOk w+ldyflgei1jj/ErMHvg7A== 0000950116-99-001484.txt : 19990810 0000950116-99-001484.hdr.sgml : 19990810 ACCESSION NUMBER: 0000950116-99-001484 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19990809 GROUP MEMBERS: CASTLE ENERGY CORP GROUP MEMBERS: CASTLE ENERGY CORPORATION GROUP MEMBERS: CEC, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PENN OCTANE CORP CENTRAL INDEX KEY: 0000893813 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PETROLEUM & PETROLEUM PRODUCTS (NO BULK STATIONS) [5172] IRS NUMBER: 521790357 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-46901 FILM NUMBER: 99680685 BUSINESS ADDRESS: STREET 1: 900 VETERANS BLVD STE 240 CITY: REDWOOD CITY STATE: CA ZIP: 94063 BUSINESS PHONE: 6503681501 MAIL ADDRESS: STREET 1: 900 VETERANS BLVD STE 240 CITY: REDWOOD CITY STATE: CA ZIP: 94063 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL ENERGY DEVELOPMENT CORP DATE OF NAME CHANGE: 19940302 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CASTLE ENERGY CORP CENTRAL INDEX KEY: 0000709355 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 760035225 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: ONE RADNOR CORPORATE CTR STE 250 STREET 2: 100 MATSONFORD RD CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 6109959400 MAIL ADDRESS: STREET 1: ONE RADNOR CORPORATE CENTER SUITE 250 STREET 2: 100 MATSONFORD CITY: RADNOR STATE: PA ZIP: 19087 FORMER COMPANY: FORMER CONFORMED NAME: MINDEN OIL & GAS INC/NEW DATE OF NAME CHANGE: 19861117 FORMER COMPANY: FORMER CONFORMED NAME: MINDEN HOLDING CO DATE OF NAME CHANGE: 19830310 SC 13D 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 (Amendment No. )* Penn Octane Corporation ----------------------- (Name of Issuer) Common Stock, par value $.01 per share -------------------------------------- (Title of Class of Securities) 707573-10-1 ----------- (CUSIP Number) Richard E. Staedtler Chief Financial Officer Castle Energy Corporation One Radnor Corporate Center, Suite 250 Radnor, PA 19087 610-995-9400 --------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) Copy to: Thomas G. Spencer, Esq., Duane, Morris & Heckscher, LLP, 4200 One Liberty Place, Philadelphia, PA 19103-7396 - -------------------------------------------------------------------------------- December 1, 1998 ---------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of ss. ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [ ]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See ss. 240.13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). Page 1 of 8 Pages SCHEDULE 13D __________________________ ________________________ CUSIP No. 707573-10-1 Page 2 of 8 Pages __________________________ ________________________ _______________________________________________________________________________ 1 NAME OF REPORTING PERSON S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Castle Energy Corporation 76-0035225 ______________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [X] (b) [ ] ______________________________________________________________________________ 3 SEC USE ONLY ______________________________________________________________________________ 4 SOURCE OF FUNDS (See Instructions) WC, 00 ______________________________________________________________________________ 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] ______________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware _______________________________________________________________________________ | | NUMBER OF | 7 | SOLE VOTING POWER SHARES | | 0 BENEFICIALLY |_____|________________________________________________________ OWNED BY | | EACH | 8 | SHARED VOTING POWER REPORTING | | 1,459,334 PERSON WITH |_____|________________________________________________________ | | | 9 | SOLE DISPOSITIVE POWER | | 0 |_____|________________________________________________________ | | | 10 | SHARED DISPOSITIVE POWER | | 1,459,334 _______________|_____|_________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,459,334 ______________________________________________________________________________ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) ______________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.13% ______________________________________________________________________________ 14 TYPE OF REPORTING PERSON (See Instructions) CO ______________________________________________________________________________ SCHEDULE 13D __________________________ ________________________ CUSIP No. 707573-10-1 Page 3 of 8 Pages __________________________ ________________________ _______________________________________________________________________________ 1 NAME OF REPORTING PERSON S.S OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON CEC, Inc. 51-0363154 ______________________________________________________________________________ 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions) (a) [X] (b) [ ] ______________________________________________________________________________ 3 SEC USE ONLY ______________________________________________________________________________ 4 SOURCE OF FUNDS (See Instructions) WC,00 ______________________________________________________________________________ 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] ______________________________________________________________________________ 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware _______________________________________________________________________________ | | NUMBER OF | 7 | SOLE VOTING POWER SHARES | | 0 BENEFICIALLY |_____|________________________________________________________ OWNED BY | | EACH | 8 | SHARED VOTING POWER REPORTING | | 1,459,334 PERSON WITH |_____|________________________________________________________ | | | 9 | SOLE DISPOSITIVE POWER | | 0 |_____|________________________________________________________ | | | 10 | SHARED DISPOSITIVE POWER | | 1,459,334 _______________|_____|_________________________________________________________ 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,459,334 ______________________________________________________________________________ 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (See Instructions) ______________________________________________________________________________ 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.13% ______________________________________________________________________________ 14 TYPE OF REPORTING PERSON (See Instructions) CO ______________________________________________________________________________ CUSIP No. 707573-10-1 Page 4 of 8 Pages SCHEDULE 13D Item 1. Security and Issuer. This 13D relates to the $.01 par value common stock (the "Common Stock") of Penn Octane Corporation ("POC"), a Delaware corporation. The address of POC's principal office is 900 Veterans Boulevard, Redwood City, California 94603. Item 2. Identity and Background. The name of the persons filing this Schedule 13D are Castle Energy Corporation ("Castle") and its wholly owned subsidiary, CEC, Inc. ("CEC"; Castle and CEC are sometimes hereinafter referred to individually as a "Reporting Person" and collectively as the "Reporting Persons"). Each Reporting Person is a Delaware corporation. Castle's principal office and business address is One Radnor Corporate Center, Suite 250, Radnor, PA 19087 and its principal business is oil and gas exploration and production. CEC's principal office and business address is 3 Beaver Valley Road, Wilmington, Delaware 19803 and its principal business is serving as a holding company. Neither Reporting Person has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) and was not, during the last five years, a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such Reporting Person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. On October 21, 1997, Castle acquired a warrant (the "1997 Warrant") to acquire 166,667 shares of POC Common Stock with an exercise price of $6.00 per share. The 1997 Warrant is exercisable through October 21, 2000 and was issued by POC as additional consideration for CEC's purchase of POC's 10% promissory note dated October 21, 1997 in the original principal amount of $1 million (the "Note") for an aggregate purchase price of $1 million, which was paid using CEC's cash. In a series of open market purchases in September 1998, CEC purchased an aggregate of 301,000 shares of POC Common Stock for an aggregate price of $382,396, which was also paid using CEC's cash. CUSIP No. 707573-10-1 Page 5 of 8 Pages On December 1, 1998, CEC agreed to extend the original June 30, 1998 maturity of the Note until June 30, 1999, in consideration for which POC provided certain security for payment of the Note and issued to Castle a warrant (the "1998 Warrant") to acquire 225,000 shares of POC Common Stock at an exercise price of $1.75 per share, exercisable until November 30, 2001. On June 9, 1999, CEC purchased 200,000 shares of POC Common Stock in the open market for an aggregate price of $260,753, which was paid using CEC's cash. On July 26, 1999, CEC agreed with POC to convert $100,000 in original principal amount of the Note into an aggregate of 66,667 shares of POC Common Stock. On July 29, 1999, CEC agreed with POC to convert the remaining $900,000 in original principal amount of the Note into 90,000 shares of POC's Series B Convertible Redeemable Preferred Stock, par value $.01 per share (the "Preferred Stock"). The Preferred Stock is convertible into shares of POC Common Stock at any time at the holder's option at the initial rate of five shares of Common Stock for each share of Preferred Stock, an aggregate of 450,000 shares of POC Common Stock. The conversion ratio is subject to adjustment upon the occurrence of certain specified events. As further consideration for the conversion of the $900,000 principal balance of the Note, POC issued to CEC an additional 50,000 shares of POC Common Stock. If POC does not redeem the Preferred Stock in accordance with its terms by September 3, 1999, POC will be obligated to issue to CEC an additional 50,000 shares of POC Common Stock. Item 4. Purpose of Transaction. The Reporting Persons acquired the securities described in this Schedule 13D for investment purposes only. Except as described in Item 3 and except that, subject to compliance with applicable securities laws, the Reporting Persons may dispose of some or all of such securities in open market transactions from time to time, the Reporting Persons currently do not have any plans and are currently not considering any proposals which relate to or which would result in: (a) the acquisition by any person of additional securities of POC, or the disposition of securities of POC; (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving POC or any of its subsidiaries; (c) a sale or transfer of a material amount of assets of POC or any of its subsidiaries; CUSIP No. 707573-10-1 Page 6 of 8 Pages (d) any change in the present board of directors or management of POC, including any plans or proposals to change the number or term of directors or to fill any existing vacancies on the board; (e) any material change in the present capitalization or dividend policy of POC; (f) any other material change in POC's business or corporate structure; (g) changes in POC's Certificate of Incorporation, Bylaws or instruments corresponding thereto or other actions which may impede the acquisition or control of POC by any person; (h) causing a class of securities of POC to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (i) a class of equity securities of POC becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (j) any action similar to any of those enumerated above. Item 5. Interest in Securities of the Issuer. (a) The Reporting Persons beneficially own an aggregate of 1,459,334 shares of POC Common Stock, or 12.13% of the outstanding shares of POC Common Stock, consisting of the following: (i) 617,667 shares owned directly by the Reporting Persons; (ii) 391,667 shares that the Reporting Persons have the right to purchase pursuant to the 1997 Warrant and the 1998 Warrant; and (iii) 450,000 shares that the Reporting Persons have the right to acquire upon the conversion of the Preferred Stock. (b) The Reporting Persons currently share with each other the power to vote or to direct the vote and the power to dispose or to direct the disposition of all of the shares described in this Schedule 13D. (c) See Item 3 of this Schedule 13D. CUSIP No. 707573-10-1 Page 7 of 8 Pages (d) No other person has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, any of the shares beneficially owned by the Reporting Persons. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. The 1997 Warrant gives Castle the right to purchase up to 166,667 shares of POC Common Stock at a price of $6.00 per share on or before October 21, 2000. The 1998 Warrant gives Castle the right to purchase up to 225,000 shares of POC Common Stock at a price of $1.75 per share on or before November 30, 2001. The 1997 Warrant and the 1998 Warrant (individually a "Warrant" and collectively the "Warrants") are each exercisable in whole or in part. The number of shares for which each Warrant is exercisable is subject to adjustment upon the occurrence of certain specified events. If the average trading price for POC's Common Stock on the Nasdaq SmallCap Market (or such other exchange on which the Common Stock is then quoted) exceeds $10.00 per share for a period of twenty consecutive trading days, POC has the right on 30 days prior written notice (during which time the Warrant may be exercised) to purchase all or any portion of a Warrant for a price of $.10 per share that is subject to the Warrant. Item 7. Material to be Filed as Exhibits. Exhibit No. Description ----------- ----------- 1 Common Stock Purchase Warrant dated October 21, 1997 from POC to Castle Energy Corporation. 2 Common Stock Purchase Warrant dated December 1, 1998 from POC to Castle Energy Corporation. CUSIP No. 707573-10-1 Page 8 of 8 Pages Signature After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. August 9, 1999 Castle Energy Corporation By: /s/ Joseph L. Castle, II ------------------------------------- Joseph L. Castle, II, Chairman and Chief Executive Officer CEC, Inc. By: /s/ Joseph L. Castle, II ------------------------------------- Joseph L. Castle, II, Chairman and Chief Executive Officer EXHIBIT INDEX Exhibit No. Description ----------- ----------- 1 Common Stock Purchase Warrant dated October 21, 1997 from POC to Castle Energy Corporation. 2 Common Stock Purchase Warrant dated December 1, 1998 from POC to Castle Energy Corporation. EX-1 2 EXHIBIT-1 NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE. NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER APPLICABLE LAW. COMMON STOCK PURCHASE WARRANT Void after October 21, 2000 Warrant to Purchase 166,667 Shares of Common Stock, $.01 par value of Penn Octane Corporation PENN OCTANE CORPORATION (POCC) This is to Certify That, FOR VALUE RECEIVED, Castle Energy Corporation or registered assign(s) (herein referred to as the "Holder") is entitled to purchase, subject to the provisions hereof, from PENN OCTANE CORPORATION, a Delaware corporation (the "Company"), but not later than 5:00 p.m., California time, on October 21, 2000 (or, if such date is not a Business Day in Redwood City, California, then on the next succeeding day which shall be a Business Day), 166,667 shares of Common Stock, $.01 par value, of the Company (the "Common Stock") at an exercise price of $6.00 per share, subject to adjustment as to number of shares and purchase price as set forth in Section 6 below. The exercise price of a share of Common Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price". For purposes of this Warrant, a "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which banking institutions in New York, New York, or in Redwood City, California, are authorized by law or regulation to close. The shares of Common Stock issuable upon exercise of the Warrants are sometimes herein called the "Warrant Stock." 1. Exercise of Warrant. This Warrant may be exercised in whole or in part at any time and from time to time by presentation and surrender hereof to the Company at its principal office with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price in immediately available funds for the number of shares specified in such form. If this Warrant is exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the shares purchasable hereunder. Upon receipt by the Company of this Warrant at the office of the Company, in proper form for exercise, accompanied by payment of the Exercise Price, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. The issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Holder for any issuance tax in respect thereof (with the exception of any federal or state income taxes applicable thereto), all such taxes to be paid by the Company, it being understood however that the Holder shall be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Holder. The Company will at no time close its transfer books against the transfer of this Warrant or the issuance of any shares of Common Stock issuable upon the exercise of this Warrant in any manner which interferes with the timely exercise of this Warrant. 2. Reservation of Shares; Stock Fully Paid. The Company agrees that at all times there shall be authorized and reserved for issuance upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance or delivery upon exercise of this Warrant. All shares which may be issued upon exercise hereof will, upon issuance, and receipt of payment therefor, be duly authorized, validly issued, fully paid and non-assessable. 3. Fractional Shares. This Warrant shall not be exercisable in such manner as to require the issuance of fractional shares. If, as a result of adjustment in the Exercise Price or the number of shares of Common Stock to be received upon exercise of this Warrant, fractional shares would be issuable, no such fractional shares shall be issued. In lieu thereof, the Company shall pay the Holder an amount in cash equal to such fraction multiplied by the Fair Market Value of a share of Common Stock. The term "Fair Market Value" shall mean, as of a particular date, the market price on such date. For purposes of this Warrant, the market price on any day shall be the last sale price on such day on the NASDAQ Stock Market, or, if the Common Stock is not then listed or admitted to trading on the NASDAQ Stock Market, on such other principal stock exchange on which such stock is then listed or admitted to trading, or, if no sale takes place on such day on any such exchange, the average of the closing bid and asked prices on such day as officially quoted on any such exchange, or, if the Common Stock is not then listed or admitted to trading on any stock exchange, the average of the reported closing bid and asked prices on such day in the over-the-counter market as quoted on the National Association of Securities Dealers Automated Quotation System or, if not so quoted, then as furnished by any member of the National Association of Securities Dealers, Inc. selected by the Company. If there shall be no meaningful over-the-counter market, then Fair Market Value shall be such amount, not less than book value, as may be determined by the Board of Directors of the Company. 4. Exchange or Assignment of Warrant. This Warrant is exchangeable without expense (other than applicable transfer taxes) at the option of the Holder, upon presentation and surrender hereof to the Company for any other Warrants of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder. Subject to the provisions of Section 12 below and any restriction on -2- transfer applicable hereto pursuant to the securities laws of the United States or any State, upon surrender of this Warrant to the Company with an assignment form duly executed, and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment, and this Warrant shall promptly be cancelled. This Warrant may be divided or combined with other Warrants which carry the same rights upon presentation hereof at the principal office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued signed by the Holder hereof. The term "Warrant" as used herein includes any Warrants into which this Warrant may be divided or exchanged, and the term "Holder" as used herein includes any holder of any Warrant into which this Warrant may be divided or for which this Warrant may be exchanged. 5. Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or in equity, and the rights of the Holder are limited to those expressed in this Warrant. 6. Adjustment of Exercise Price and Number of Shares. The number and kind of securities purchasable upon the exercise or exchange of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) Adjustment for Change in Capital Stock. If at any time after the date hereof, the Company: (A) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock; (B) subdivides its outstanding shares of Common Stock into a greater number of shares; (C) combines its outstanding shares of Common Stock into a smaller number of shares; (D) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock; or (E) issues by reclassification of its Common Stock any shares of its capital stock; then the Exercise Price in effect immediately prior to such action shall be adjusted so that the Holder may receive, upon exercise or exchange of this Warrant and payment of the same aggregate consideration, the number of shares of capital stock of the Company which the Holder would have owned immediately following such action if the Holder had exercised or exchanged the Warrant immediately prior to such action. -3- The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. (b) Adjustment for Other Distributions. If at any time after the date hereof, the Company distributes to all holders of its Common Stock any of its assets or debt securities, the Exercise Price following the record date shall be adjusted in accordance with the following formula: E'= E X M-F --- M where: E' = the adjusted Exercise Price. E = the Exercise Price immediately prior to the adjustment, M = the current market price (as defined in (e) below) per share of Common Stock on the record date of the distribution. F = the aggregate fair market value (as conclusively determined by the Board of Directors of the Company) on the record date of the assets or debt securities to be distributed divided by the number of outstanding shares of Common Stock. The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive the distribution. In the event that such distribution is not actually made, the Exercise Price shall again be adjusted to the Exercise Price as determined without giving effect to the calculation provided hereby. In no event shall the Exercise Price be adjusted to an amount less than zero. This subsection does not apply to cash dividends or cash distributions paid out of consolidated current or retained earnings as shown on the books of the Company and paid in the ordinary course of business. (c) Deferral of Issuance or Payment. In any case in which an event covered by this Section 6 shall require that an adjustment in the Exercise Price be made effective as of a record date, the Company may elect to defer making such adjustment until the occurrence of such event by (i) issuing to the Holder, if this Warrant is exercised after such record date but before the occurrence of such event, the shares of Common Stock and other capital stock of the Company, if any, issuable upon such exercise, had such adjustment been made as of the record date, over and above the shares of Common Stock or other capital stock of the Company, if any, issuable upon such exercise on the basis of the Exercise Price as unadjusted, and (ii) paying to the Holder by check any amount in lieu of the issuance of fractional shares pursuant to Section 3. -4- (d) When No Adjustment Required. No adjustment need he made for a change in the par value or no par value of the Common Stock. (e) Statement of Adjustments. Whenever the Exercise Price and number of shares of Common Stock purchasable hereunder is required to be adjusted as provided herein, the Company shall promptly prepare a certificate signed by its President or any Vice President and its Treasurer or Assistant Treasurer, setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description hereunder), and the Exercise Price and number of shares of Common Stock purchasable hereunder after giving effect to such adjustment, and shall promptly cause copies of such certificates to be mailed to the Holder. (f) No Adjustment Upon Exercise of Warrants. No adjustments shall be made under any Section herein in connection with the issuance of Warrant Stock upon exercise or exchange of the Warrants. (g) No adjustment for Small Amounts. Anything herein to the contrary notwithstanding, no adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case, any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment so carried forward, shall amount to $.05 per share or more. (h) Common Stock Defined. Subject to the provisions of Section 7 hereof, shares issuable upon exercise or exchange hereof shall include only shares of the class designated as Common Stock of the Company as of the date hereof or shares of any class or classes resulting from any reclassification or reclassifications thereof or as a result of any corporate reorganization as provided for in Section 7 hereof. 7. Reclassification, Reorganization, Consolidation or Merger. In the event of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company (other than a subdivision or combination of the outstanding Common Stock and other than a change in the par value of the Common Stock) or in the event of any consolidation or merger of the Company with or into another corporation (other than a merger in which merger the Company is the continuing corporation and that does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise or exchange of this Warrant) or in the event of any sale, lease, transfer or conveyance to another corporation of the property and assets of the Company as an entirety or substantially as an entirety, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter, by exercising this Warrant, to purchase the kind and amount of shares of stock and other securities and property (including cash). receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock that might have been received upon exercise or exchange of this Warrant immediately prior to such reclassification, capital reorganization, change, consolidation, merger, sale or conveyance. Any such provision shall include provisions for -5- adjustments in respect of such shares of stock and other securities and property that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section 7 shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or classification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for, or of, a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of subsection (a) of Section 6. 8. Notice to Warrant Holders. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon its Common Stock, or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any shares of stock or securities of any class or any other rights, or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, or any conveyance of all or substantially all of the assets of the Company, or voluntary or involuntary dissolution or liquidation of the Company shall be effected, then, in any such case, the Company shall cause to be mailed to the Holder, at least thirty (30) days prior to the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, dissolution or liquidation is to take place and the date, if any is to be fixed, as of which the holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution or liquidation. 9. Certain Obligations of the Company. The Company agrees that it will not increase the par value of the shares of Warrant Stock issuable upon exercise of this Warrant above the prevailing and currently applicable Exercise Price hereunder, and that before taking any action that would cause an adjustment reducing the prevailing and current applicable Exercise Price hereunder below the then par value of the Warrant Stock at the time issuable upon exercise of this Warrant, the Company will take such corporate action, as in the opinion of its counsel, may be necessary in order that the Company may validly issue fully paid, nonassessable shares of such Warrant Stock. The Company will maintain an office or agency (which shall initially be the Company's principal office in Redwood City, California) where presentations and demands to or upon the Company in respect of this Warrant may be made and will give notice in writing to the registered holders of the then outstanding Warrants, at their addresses as shown on the books of the Company, of each change of location thereof. 10. Repurchase Right. Notwithstanding any other provisions of this Warrant, the Company may, in the event that the average trading price of the Company's Common Stock, as reported on the NASDAQ SmallCap Market or such other exchange on which the Company's Common Stock may then be quoted, exceeds $10.00 for a period of twenty (20) consecutive trading days, upon not less than thirty (30) days' notice in writing to the Holder, repurchase all -6- or any portion of this Warrant at a Purchase price equal to $.10 per share of Common Stock covered hereby, such purchase price to be proportionally adjusted each time the Exercise Price is adjusted pursuant to Section 6 hereof. During such thirty (30) day period, the Holder may exercise such Warrants in accordance with the terms hereof. The closing on such repurchase shall occur on the date and at the time set forth in such notice at the office of the Company in Redwood City, California or at such other place as shall be agreed upon by the Company and the Holder. At the Closing, the Company shall deliver to the Holder an amount equal to the purchase price in immediately available funds and the Holder will deliver this Warrant to the Company for cancellation. To the extent any repurchase hereunder is of less than all of the rights represented by this Warrant, the Company will deliver to the Holder a new Warrant covering the rights not so purchased. 11. Determination by Board of Directors. All determinations by the Board of Directors of the Company under the provisions of this Warrant will be made in good faith with due regard to the interest of the Holder and in accordance with sound financial practices. 12. Notice. All notices to the Holder shall be in writing, and all notices and certificates given to the Holder shall be sent registered or certified mail, return receipt requested, to such Holder at his address appearing on the records of the Company. 13. Replacement of Lost, Stolen, Destroyed or Multilated Warrants. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft. or destruction, upon delivery of any indemnity bond in such reasonable amount as the Company may determine in the case of any such mutilation, upon the surrender of such Warrant for cancellation, the Company at its expense, will execute and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor. 14. Number and Gender. Whenever the singular number is used herein, the same shall include the plural where appropriate, and words of any gender shall include each other gender where appropriate. 15. Applicable Law. This Warrant shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to its conflict of laws principles. PENN OCTANE CORPORATION By: /s/ Jerome B. Richter -------------------------------- Name: Jerome B. Richter Title: Chairman, President and Chief Executive Officer Dated, October 21, 1997 -7- PURCHASE FORM Dated _________, _____ The undersigned hereby irrevocably elects to exercise the within Warrant to purchase ______________ shares of Common Stock and hereby makes payment of $_________ in payment of the exercise price thereof. Signature ________________________ EX-2 3 EXHIBIT-2 NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITES LAWS OF ANY STATE. NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF REGISTRATION OR QUALIFICATION OR AN EXEMPTION THEREFROM UNDER APPLICABLE LAW. COMMON STOCK PURCHASE WARRANT Void after November 30, 2001 Warrant to Purchase 225,000 Shares of Common Stock, $.01 par value of Penn Octane Corporation PENN OCTANE CORPORATION (POCC) This is to Certify That, FOR VALUE RECEIVED, Castle Energy Corporation or registered assign(s) (herein referred to as the "Holder") is entitled to purchase, subject to the provisions hereof, from PENN OCTANE CORPORATION, a Delaware corporation (the 'Company"), but not later than 5:00 p.m., California time, on November 30, 2001 (or, if such date is not a Business Day in Redwood City, California, then on the next succeeding day which shall be a Business Day), 225,000 shares of Common Stock, $.01 par value, of the Company (the "Common Stock") at an exercise price of $1.75 per share, subject to adjustment as to number of shares and purchase price as set forth in Section 6 below. The exercise price of a share of Common Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price". For purposes of this Warrant, a "Business Day" shall mean any day other than a Saturday, a Sunday or a day on which banking instituitions, in New York, New York, or in Redwood City, California, are authorized by law or regulation to close. The shares of Common Stock issuable upon exercise of the Warrants are sometimes herein called the 'Warrant Stock." 1. Exercise of Warrant. This Warrant may be exercised in whole or in part at any time and from time to time by presentation and surrender hereof to the Company at its principal office with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price in immediately available funds for the number of shares specified in such form. If this Warrant is exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the right of the Holder to purchase the balance of the shares purchasable hereunder. Upon receipt by the Company of this Warrant at the office of the Company, in proper form for exercise, accompanied by payment of the Exercise Price, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder. The issuance of certificates for shares of Common Stock upon the exercise of this Warrant shall be made without charge to the Holder for any issuance tax in respect thereof (with the exception of any federal or state income taxes applicable thereto), all such taxes to be paid by the Company, it being understood however that the Holder shall be required to pay any tax which way be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Holder. The Company will at no time close its transfer books against the transfer of this Warrant or the issuance of any shares of Common Stock issuable upon the exercise of this Warrant in any manner which interferes with the timely exercise of this Warrant. 2. Reservation of Shares; Stock Fully Paid. The Company agrees that at all times there shall be authorized and reserved for issuance upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance or delivery upon exercise of this Warrant. All shares which may be issued upon exercise hereof will, upon issuance, and receipt of payment therefor, be duly authorized, validly issued, fully paid and non-assessable. 3. Fractional Shares. This Warrant shall not be exercisable in such manner as to require the issuance of fractional shares. If, as a result of adjustment in the Exercise Price or the number of shares of Common Stock to be received upon exercise of this Warrant, fractional shares would be issuable, no such fractional shares shall be issued. In lieu thereof, the Company shall pay the Holder an amount in cash equal to such fraction multiplied by the Fair Market Value of a share of Common Stock. The term "Fair Market Value" shall mean, as of a particular date, the market price on such date. For purposes of this Warrant, the market price on any day shall be the last sale price on such day on the NASDAQ Stock Market, or, if the Common Stock is not then listed or admitted to trading on the NASDAQ Stock Market, on such other principal stock exchange on which such stock is then listed or admitted to trading, or, if no sale takes place on such day on any such exchange, the average of the closing bid and asked prices on such day as officially quoted on any such exchange, or, if the Common Stock is not then listed or admitted to trading on any stock exchange, the average of the reported closing bid and asked prices on such day in the over-the-counter market as quoted on the National Association of Securities Dealers Automated Quotation System or, if not so quoted, then as furnished by any member of the National Association of Securities Dealers, Inc. selected by the Company. If there shall be no meaningful over-the-counter market, then Fair Market Value shall be such amount, not less than book value, as may be determined by the Board of Directors of the Company. 4. Exchange or Assignment of Warrant. This Warrant is exchangeable without expense (other than applicable transfer taxes) at the option of the Holder, upon presentation and surrender hereof to the Company for any other Warrants of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder. Subject to the provisions of Section 12 below and any restriction on transfer applicable hereto pursuant to the securities laws of the United States or any State, upon surrender of this Warrant to the Company with an assignment form duly executed, and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment, and this Warrant shall promptly be cancelled. This Warrant may be divided or combined with other Warrants which carry the same rights upon presentation hereof at the principal office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued signed by the Holder hereof. The term "Warrant" as used herein includes any Warrants into which this Warrant may be divided or exchanged, and the term "Holder" as used herein includes any holder of any Warrant into which this Warrant may be divided or for which this Warrant may be exchanged. 5. Rights of the Holder. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or in equity, and the rights of the Holder are limited to those expressed in this Warrant. 6. Adjustment of Exercise Price and Number of Shares. The number and kind of securities purchasable upon the exercise or exchange of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the occurrence of certain events, as follows: (a) Adjustment for Change in Capital Stock. If at any time after the date hereof, the Company: (A) pays a dividend or makes a distribution on its Common Stock in shares of its Common Stock; (B) subdivides its outstanding shares of Common Stock into a greater number of shares; (C) combines its outstanding shares of Common Stock into a smaller number of shares; (D) makes a distribution on its Common Stock in shares of its capital stock other than Common Stock; or (E) issues by reclassification of its Common Stock any shares of its capital stock; then the number and kind of securities purchasable upon exercise or exchange of this Warrant and the Exercise Price in effect immediately prior to such action shall each be adjusted so that the Holder may receive upon exercise or exchange of this Warrant and payment of the same aggregate consideration, the number of shares of capital stock of the Company which the Holder would have owned immediately following such action if the Holder had exercised or exchanged the Warrant immediately prior to such action. The adjustment shall become effective immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision, combination or reclassification. (b) Adjustment for Other Distributions. If at any time after the date hereof, the Company distributes to all holders of its Common Stock any of its assets or debt securities, the Exercise Price following the record date shall be adjusted in accordance with the following formula: E'= E x M-F --- M where: E' = the adjusted Exercise Price. E = the Exercise Price immediately prior to the adjustment. M = the current market price (as defined in (e) below) per share of Common Stock on the record date of the distribution. F = the aggregate fair market value (as conclusively determined by the Board of Directors of the Company) on the record date of the assets or debt securities to be distributed divided by the number of outstanding shares of Common Stock. The adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive the distribution. In the event that such distribution is not actually made, the Exercise Price shall again be adjusted to the Exercise Price as determined without giving effect to the calculation provided hereby. In no event shall the Exercise Price be adjusted to an amount less than zero. This subsection does not apply to cash dividends or cash distributions paid out of consolidated current or retained earnings as shown on the books of the Company and paid in the ordinary course of business. (c) Deferral of Issuance or Payment. In any case in which an event covered by this Section 6 shall require that an adjustment in the Exercise Price be made effective as of a record date, the Company may elect to defer making such adjustment until the occurrence of such event. If the Company so defers making any such adjustment and if this Warrant is exercised after such record date but before the occurrence of such event, the shares of Common Stock and other capital stock of the Company if any, issuable upon such exercise, had such adjustment been made as of the record date, over and above the shares of Common Stock or other capital stock of the Company, if any, issuable upon such exercise on the basis of the Exercise Price as unadjusted, shall be issued promptly upon the occurrence of such event and the Company shall pay to the Holder by check any amount in lieu of the issuance of fractional shares pursuant to Section 3. (d) When No Adjustment Required. No adjustment need be made for a change in the par value or no par value of the Common Stock. (e) Statement of Adjustments. Whenever the Exercise Price and number of shares of Common Stock purchasable hereunder is required to be adjusted as provided herein, the Company shall promptly prepare a certificate signed by its President or any Vice President and its Treasurer or Assistant Treasurer, setting forth, in reasonable detail the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated (including a description hereunder), and the Exercise Price and number of shares of Common Stock purchasable hereunder after giving effect to such adjustment, and shall promptly cause copies of such certificates to be mailed to the Holder. (f) No Adjustment Upon Exercise of Warrants. No adjustments shall be made under any Section herein in connection with the issuance of Warrant Stock upon exercise or exchange of the Warrants. (g) No Adjustment for Small Amounts. Anything herein to the contrary notwithstanding, no adjustment of the Exercise Price shall be made if the amount of such adjustment shall be less than $.05 per share, but in such case, any adjustment that would otherwise be required then to be made shall be carried forward and shall be made at the time and together with the next subsequent adjustment which, together with any adjustment so carried forward, shall amount to $.05 per share or more. (h) Common Stock Defined. Subject to the provisions of Section 7 hereof, shares issuable upon exercise or exchange hereof shall include only shares of the class designated as Common Stock of the Company as of the date hereof or shares of any class or classes resulting from any reclassification or reclassifications thereof or as a result of any corporate reorganization as provided for in Section 7 hereof. 7. Recassification, Reorganization, Consolidation or Merger. In the event of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company (other than a subdivision or combination of the outstanding Common Stock and other than a change in the par value of the Common Stock) or in the event of any consolidation or merger of the Company with or into another corporation (other than a merger in which merger the Company is the continuing corporation and that does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise or exchange of this Warrant) or in the event of any sale, lease, transfer or conveyance to another corporation of the property and assets of the Company as an entirety or substantially as an entirety, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter, by exercising this Warrant, to purchase the kind and amount of shares of stock and other securities and property (including cash) receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock that might have been received upon exercise or exchange of this Warrant immediately prior to such reclassification, capital reorganization, change, consolidation, merger, sale or conveyance. Any such provision shall include provisions for adjustments in respect of such shares of stock and other securities and property that shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section 7 shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or classification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for, or of, a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of subsection (a) of Section 6. 8. Notice to Warrant Holders. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon its Common Stock, or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any shares of stock or securities of any class or any other rights, or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, or any conveyance of all or substantially all of the assets of the Company, or voluntary or involuntary dissolution or liquidation of the Company shall be effected, then, in any such case, the Company shall cause to be mailed to the Holder, at least thirty (30) days prior to the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, dissolution or liquidation is to take place and the date, if any is to be fixed, as of which the holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution or liquidation. 9. Certain Obligations of the Company. The Company agrees that it will not increase the par value of the shares of Warrant Stock issuable upon exercise of this Warrant above the prevailing and currently applicable Exercise Price hereunder, and that before taking any action that would cause an adjustment reducing the prevailing and current applicable Exercise Price hereunder below the then par value of the Warrant Stock at the time issuable upon exercise of this Warrant, the Company will take such corporate action, as in the opinion of its counsel, may be necessary in order that the Company may validly issue fully paid, nonassessable shares of such Warrant Stock. The Company will maintain an office or agency (which shall initially be the Company's principal office in Redwood City, California) where presentations and demands to or upon the Company in respect of this Warrant may be made and will give notice in writing to the registered holders of the then outstanding Warrants, at their addresses as shown on the books of the Company, of each change of location thereof. 10. Repurchase Right. Notwithstanding any other provisions of this Warrant, the Company may, in the event that the average trading price of the Company's Common Stock, as reported on the NASDAQ SmallCap Market or such other exchange on which the Company's Common Stock may then be quoted, exceeds $10.00 for a period of twenty (20) consecutive trading days, upon not less than thirty (30) days' notice in writing to the Holder, repurchase all or any portion of this Warrant at a purchase price equal to $.10 per share of Common Stock covered hereby, such purchase price to be proportionally adjusted each time the Exercise Price is adjusted pursuant to Section 6 hereof. During such thirty (30) day period, the Holder may exercise such Warrants or a portion thereof in accordance with the terms hereof. The closing on such repurchase shall occur on the date and at the time set forth in such notice at the office of the Company in Redwood City, California or at such other place as shall be agreed upon by the Company and the Holder. At the Closing, the Company shall deliver to the Holder an amount equal to the purchase price in immediately available funds and the Holder will deliver this Warrant to the Company for cancellation. To the extent any repurchase hereunder is of less than all of the rights represented by this Warrant, the Company will deliver to the Holder a new Warrant covering the rights not so purchased. 11. Determination by Board of Directors. All determinations by the Board of Directors of the Company under the provisions of this Warrant will be made in good faith with due regard to the interest of the Holder and in accordance with sound financial practices. 12. Notice. All notices to the Holder shall be in writing, and all notices and certificates given to the Holder shall be sent registered or certified mail, return receipt requested, to such Holder at his address appearing on the records of the Company. 13. Replacement of Lost, Stolen, Destroyed or Mutilated Warrants. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft or destruction, upon delivery of any indemnity bond in such reasonable amount as the Company may determine in the case of any such mutilation, upon the surrender of such Warrant for cancellation, the Company at its expense, will execute and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a new Warrant of like tenor. 14. Number and Gender. Whenever the singular number is used herein, the same shall include the plural where appropriate, and words of any gender shall include each other gender where appropriate. 15. Applicable Law. This Warrant shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to its conflict of laws principles. PENN OCTANE CORPORATION By: /s/ Jerome B. Richter ---------------------------- Name: Jerome B. Richter Title: Chairman, President and Chief Executive Officer Dated: December 1, 1998 PURCHASE FORM Dated ________, _____ The undersigned hereby irrevocably elects to exercise the within Warrant to purchase __________shares of Common Stock and hereby makes payment of $_____________ in payment of the exercise price thereof. Signature ________________________ -----END PRIVACY-ENHANCED MESSAGE-----